UK GAAP: the new regime

Converging is edging closer

Convergence of financial reporting standards is at last in sight with the publishing by the Financial Reporting Council of FRS 100, FRS 101 and FRS 102, which between them set out the new UK GAAP framework that will be mandatory from 1 January 2015. 

All extant FRSs, SSAPs and UITF Abstracts, apart from FRS 27 Life Assurance and the FRSSE, will be withdrawn for accounting periods beginning on or after 1 January 2015.  

FRS 100 Application of Financial Reporting Requirements sets out how the new regime will work, summarised in paragraph four of the FRS:

'4 Financial statements (whether consolidated financial statements or individual financial statements) that are within the scope of this FRS, and that are not required by the IAS Regulation or other legislation or regulation to be prepared in accordance with EU-adopted IFRS, must be prepared in accordance with the following requirements:

(a) If the financial statements are those of an entity that is eligible to apply the FRSSE , they may be prepared in accordance with that standard;

(b) If the financial statements are those of an entity that is not eligible to apply the FRSSE, or of an entity that is eligible to apply the FRSSE but chooses not to do so, they must be prepared in accordance with FRS 102, EU-adopted IFRS or, if the financial statements are the individual financial statements of a qualifying entity, FRS 101.'

The standard highlights that if the reporting entity prepares its accounts under a SORP, this will not change and the appropriate SORP should still be applied, although the provisions of a SORP will cease to have effect, for example, to the extent that they conflict with a more recent financial reporting standard.

SORPs are being rewritten by a number of the issuing bodies with drafts for consultation expected this year; some are likely to contain radical changes! You can expect updates over the coming months.

Transitional arrangements

The transitional arrangements to be undertaken on first-time application of FRS 100 are set out in the FRSSE for entities transitioning to the FRSSE and in FRS 102 for entities transitioning to that standard from full UK standards.

Entities changing to EU-adopted IFRS should refer to IFRS 1 for transitional arrangements.  

Small entities that apply FRS 101 shall, unless they are applying EU-adopted IFRS prior to the date of transition, apply the requirements of paragraphs 6 to 33 of IFRS 1 as adopted by the EU.

There will be some consequential amendments to the FRSSE, and a ‘new’ version effective January 2015 will replace the current FRSSE (effective April 2008).


Section 401 of the Companies Act 2006 exempts, subject to certain conditions, an intermediate parent from the requirement to prepare consolidated financial statements where its parent is not established under the law of an EEA state, as long as the company and all of its subsidiary undertakings are be included in consolidated accounts for a larger group drawn up to the same date, or to an earlier date in the same financial year, by a parent undertaking.

Such accounts must be prepared in accordance with the Seventh Directive. This means that they meet the basic requirements of the Fourth and Seventh Directives - in particular, the requirement to give a true and fair view, without implying strict conformity with each and every provision.

Additionally, FRS 101 and FRS 102 permit certain exemptions from disclosures, but in some cases those exemptions are subject to equivalent disclosures being included in the consolidated financial statements of the group in which the entity is consolidated.

Where those exemptions are to be applied, it will be necessary to consider whether the consolidated financial statements of the parent provide disclosures that meet the basic disclosure requirements of the relevant standard without requiring strict conformity with each and every disclosure.

Moving restrictions relaxed

Previously there were restrictions on moving between IAS accounts and Companies Act accounts, with sections 395 and 403 of the act restricting an entity’s ability to move. Statutory Instrument 2012/2301 has relaxed that rule and allows the change for financial years ending on or after 1 October 2012, for a reason other than a relevant change of circumstance, once in a five-year period.

For more information, see 'Related links'.